Ahead of the February 8th snap election, Japan's new Prime Minister Sanae Takaichi has unveiled an ambitious economic plan to boost growth despite the country's staggering public debt, which exceeds 250% of GDP. The strategy focuses on targeted stimulus, including direct household support and productivity-boosting investments, while capping new bond issuance at around 30 trillion yen. With rising bond yields already straining debt servicing costs, Takaichi aims to leverage accommodative Bank of Japan policies to keep borrowing affordable. Critics worry that high yields and potential losses on existing bonds could balloon interest payments, squeezing budgets further if growth falters or demographics worsen spending pressures. Yet, the plan could hold if inflation nears 2%, wage gains fuel revenue, and structural reforms enhance productivity to outpace debt accumulation. Ultimately, success hinges on market confidence and coordinated monetary-fiscal moves to prevent a vicious cycle of higher yields and deficits.
EQUITY
Global markets continue to sell tech, but surprisingly, the beauty company Estée Lauder became the worst-performing stock after losing 19.2%, suspected to be from insufficient guidance and heavy turnaround costs. The broader decline saw the Nasdaq hit a November low, with tech and AI-related stocks leading losses while Bitcoin dipped below $60,000. Economic concerns grew as U.S. job openings fell to a five-year low, justifying the Fed's hawkish rhetoric.
GOLD
Precious metals face difficulties justifying their sky-high price as gold settled almost 4% lower and silver crashed almost 20% with a report of a billionaire Chinese trader betting on a massive short position, extending both metals' second weekly loss after January's record highs. The highly anticipated clash between Iran and the United States that might ease in Friday talks in Oman diminished gold's safe-haven appeal, though ongoing dedollarisation continues to support price.
OIL
Brent crude oil prices consolidated around $67 to $68 per barrel, marking their first weekly drop in six weeks after the market failed to recover from Monday sell-offs even with a two-day rally, hinting at uncertainty in upcoming U.S.-Iran negotiations, which involve the critical Strait of Hormuz oil route. Analysts now anticipate that fading risk premiums could give way to deteriorating fundamentals, potentially driving prices toward $50 per barrel by the end of 2026.
CURRENCY
The U.S. dollar managed to continue its momentum to a 1.5-week high, benefitting from broad risk aversion and hawkish Fed commentary, though weak labour data may limit gains. The yen weakened ahead of Japan's pivotal election that might lead to fiscal expansion, and sterling declined following the Bank of England's narrowly split decision to hold rates. Treasury yield had also fallen sharply due to labour data, suggesting a flight to safety.
